NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Finjan Holdings, Inc., a Delaware corporation (the “Company” or “Finjan Holdings”), is a cybersecurity company focused on licensing and enforcement, developing mobile security applications, providing consulting services, and investing in cybersecurity technologies and intellectual property. Licensing and enforcement of its cybersecurity technology patent portfolio is operated by its wholly-owned subsidiary Finjan, Inc. (“Finjan”). The mobile security business is operated by its wholly owned subsidiary Finjan Mobile, Inc., ("Finjan Mobile") and the consulting services business is operated by its wholly-owned subsidiary, CybeRisk Security Solutions LLC ("CybeRisk"). Revenues and operations from the Company's Finjan Mobile security business and the Company's CybeRisk advisory services were deemed immaterial for the three and nine months ended September 30, 2016 and 2015.
BASIS OF PRESENTATION
These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (“SEC”), for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) can be condensed or omitted. The December 31, 2015 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto of the Company for the year ended
December 31, 2015
which were included in the annual report on Form 10-K filed by the Company on March 25, 2016.
In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the three and nine months ended
September 30, 2016
are not necessarily indicative of the operating results for the year ending December 31, 2016, or any other interim or future periods.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to stock-based compensation, investments, the determination of the economic useful life of property and equipment, income taxes and valuation allowances against net deferred tax assets. Management bases its estimates on historical experience or on various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of Finjan Holdings and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
REVENUE RECOGNITION
Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product or service has occurred, all obligations have been performed pursuant to the terms of the agreement, the sales price is fixed or determinable, and collectability is reasonably assured.
Revenue from the Company’s cybersecurity business results from grants of licenses to its patented cybersecurity technology and settlements reached from legal enforcement of the Company’s patent right. Revenue is recognized when the arrangement with the licensee has been signed and the license has been delivered and made effective, provided the license fees are fixed or determinable and collectability is reasonably assured.
The total amount of the consideration received upon any settlement or judgment is allocated to each element based on the fair value of each element. Elements provided in either settlement agreements or judgments include, the value of a license, legal release and interest. Fair value of licensing agreements and royalty revenues, are recognized as revenues in the condensed
consolidated statement of operations. Elements not related to license agreements and royalty revenue in nature will be reflected in other income (expense), net in the condensed consolidated statements of operations. Legal release as part of a settlement agreement is recognized as a separate line item in the condensed consolidated statements of operations when value can be allocated to the legal release. When the Company reaches a settlement with a defendant, no value is allocated to the legal release since the existence of a settlement removes legal standing to bring a claim of infringement, and without a legal claim, the legal release has no economic value. The element that is applicable to interest income will be recorded in other income (expense), net.
When settlements or judgments are achieved at discounts to the fair value of a license, the Company allocates the full settlement or judgment, excluding specifically named elements as mentioned above, to the value of the license agreement or royalty revenue under the residual method relative to full license fair value prior to the discount.
FOREIGN CURRENCY
Foreign currency denominated assets and liabilities of foreign subsidiaries, where the local currency is the functional currency, are translated into U.S. dollars using the exchange rates in effect at the balance sheet dates, and income and expenses are translated using average exchange rates during the period. The resulting foreign currency translation adjustments were deemed immaterial for the periods presented.
Gains and losses from foreign currency transactions are included in other income (expense), net in the accompanying condensed consolidated statements of operations. Foreign currency transaction gains (losses) were immaterial for the periods presented, and are included as general and administrative expense, in the accompanying condensed consolidated financial statements.
CONCENTRATIONS OF CREDIT RISK
The Company maintains substantially all of its cash and cash equivalents in financial institutions located in the United States. At times, the Company’s cash and cash equivalent balances may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limits. The Company has not experienced any losses in such accounts. As of
September 30, 2016
and
December 31, 2015
, substantially all of the Company’s cash and cash equivalents are uninsured.
SERIES A PREFERRED STOCK
The Company accounts for the redemption premium and issuance costs on its Series A Preferred stock by recognizing changes in the redemption value immediately as they occur and adjusting the carrying value of the security to equal the redemption value at the end of each reporting period. This method views the end of the reporting period as if it were also the redemption date for the security.
NET LOSS PER COMMON SHARE
Basic net loss per common share is based upon the weighted-average number of common shares outstanding. Diluted net loss per common share is based on the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding.
Potentially dilutive common shares from employee equity plans are determined by applying the treasury stock method to the assumed exercise of warrants and share options and were excluded from the computation of diluted net loss per share because their inclusion would be anti-dilutive and consist of the following:
|
|
|
|
|
|
|
|
September 30,
|
|
2016
|
|
2015
|
Stock options
|
1,718,832
|
|
|
1,440,832
|
|
Restricted Stock Units
|
431,747
|
|
|
465,197
|
|
Total
|
2,150,579
|
|
|
1,906,029
|
|
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In August, 2016, FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” that addresses the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This ASU addresses the eight specific cash flow issues. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effect of this standard on its consolidated financial statements and related disclosures.
In March 2016, FASB issued
ASU No. 2016-07 "Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting"
. The amendments require upon qualifying for the equity method of accounting that no retroactive adjustment of the investment be made. In addition, the amendments require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting, recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Early Adoption is permitted. The Company is currently evaluating the effect of the standard on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU
No. 2016-08 "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)"
. The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09, “
Revenue from Contracts with Customers (Topic 606)”.
Public entities should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early adoption is permitted commencing January 1, 2017. Subsequently, in April 2016, the FASB issued
ASU No. 2016-10 ‘’Revenue from Contracts with Customers (Topic 606) (“ASU 2016-10”): identifying Performance Obligations and Licensing
”. The amendments add further guidance on identifying performance obligations and also improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the effect of the new revenue standard on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU
No. 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
”. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any interim or annual period. The Company is currently evaluating the effect of this standard on its consolidated financial statements and related disclosures.
Other recent accounting standards that have been issued or proposed by FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact the Company's consolidated financial statements upon adoption.
NOTE 2 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The following table sets forth the Company’s aggregate future minimum payments under its operating lease commitments as of
September 30, 2016
(in thousands):
|
|
|
|
|
For the year ending December 31,
|
|
2016, (remaining three months)
|
$
|
271
|
|
2017
|
781
|
|
2018
|
459
|
|
|
$
|
1,511
|
|
The Company accounts for its leases under the straight-line method of accounting. Deferred rent payable was
$75,000
and
$80,000
as of
September 30, 2016
and December 31, 2015, respectively, and is included in long term liabilities on the condensed consolidated balance sheets.
Rent expense was
$188,000
and
$586,000
for the three and nine months ended September 30, 2016, respectively, and
$187,000
and
$474,000
for the three and nine months ended September 30, 2015, respectively.
Rental income, which commenced in the third quarter of 2015, was
$88,000
and
$260,000
, respectively for the three and nine months ended September 30, 2016, and
$31,000
for the same periods in 2015.
Sublease income is recorded as a reduction in rental expense. Future minimum lease payments to be received under the sublease agreements as of September 30, 2016 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ending December 31,
|
New York
|
|
Menlo Park
|
|
Total
|
2016, (remaining three months)
|
$
|
41
|
|
|
$
|
48
|
|
|
$
|
89
|
|
2017
|
165
|
|
|
178
|
|
|
343
|
|
2018
|
127
|
|
|
—
|
|
|
127
|
|
|
$
|
333
|
|
|
$
|
226
|
|
|
559
|
|
Capital Commitments
On November 21, 2013, the Company made a
$5.0 million
commitment to invest in JVP VII Cyber Strategic Partners, L.P. (the “JVP Fund”), an Israel-based limited partnership venture capital fund seeking to invest in early-stage cyber technology companies. If and when the Company funds the entire amount of the investment, it will be less than a
10%
limited partnership interest in which the Company will not be able to exercise control over the fund. Accordingly, the Company has accounted for this investment under the cost method of accounting.
On June 8, 2015, the Company received a cash distribution of
$0.8 million
as a portion of a gross entitlement of
$1.3 million
from its investment in the JVP Fund, the remainder
$0.5 million
was reinvested in the fund. Along with its cash investments of
$2.3 million
, it represents a total investment of
$2.8 million
. The distribution is a portion of the gross proceeds allocated to the Company's investment. The retained proceeds did not reduce the Company's future capital commitment to the venture capital fund. The Company has made a
$0.6 million
contribution to the fund during the nine months ended September 30, 2016. As of September 30, 2016, the Company had a
$2.7 million
outstanding capital commitment to the venture capital fund, which can be called any time.
NOTE 3 - ACCRUED EXPENSES
The components of accrued expenses are as below:
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|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
(in thousands)
|
Legal - Litigation / Licensing
|
$
|
2,024
|
|
|
$
|
100
|
|
Legal - Other
|
—
|
|
|
146
|
|
Compensation
|
259
|
|
|
204
|
|
Other
|
15
|
|
|
—
|
|
|
$
|
2,298
|
|
|
$
|
450
|
|
NOTE 4 - LICENSE, SETTLEMENT AND RELEASE AGREEMENT
On June 30, 2016, Finjan announced that Finjan and a European cloud-based network security firm (“European Licensee”) had entered into a Confidential Patent License Agreement (the “License Agreement”) effective as of June 30, 2016. Under the License Agreement, European Licensee obtains a nonexclusive, term license in the United States under Finjan’s U.S. patents to make, have made, use, sell (directly or indirectly), offer to sell, import, distribute and otherwise dispose of Licensee’s covered products. European Licensee paid Finjan
$565,000
in cash on June 30, 2016.
On June 3, 2016, Finjan entered into a Patent License, Settlement and Release Agreement with Proofpoint, Inc. and Amorize Technologies (collectively, “Proofpoint”). The Proofpoint license provides for licensee to pay Finjan the sum of
$10.9 million
in cash, in which
$4.3 million
was received on June 6, 2016,
$3.3 million
is payable on or before January 4, 2017, and
$3.3 million
is payable on or before January 3, 2018. The Company recognized
$4.3 million
of the
$10.9 million
license as revenues as of June 30, 2016, as such amount was determined to be fixed and determinable, in accordance with the Company’s revenue recognition policy as described in Note 1. The remaining balance of
$6.6 million
under the terms of the June 3, 2016 License will be recognized as revenues when collectability is reasonably assured. In exchange for the foregoing and other valuable consideration, Finjan agreed to, subject to certain restrictions, limits and other conditions, grant Proofpoint a non-exclusive, irrevocable (except in the case of non-payment by Proofpoint or other material breach), worldwide license under Finjan Patents during the Term as specified in the June 3, 2016 License.
On December 30, 2015, Finjan entered into a Confidential Patent License, Settlement and Release Agreement (“December 30, 2015 License”), effective December 29, 2015, with a United States-based third party (“U.S. Licensee”). The December 30, 2015 License provides for U.S. Licensee to pay Finjan the sum of
$3.65 million
in cash, in which
$1.0 million
was received on December 30, 2015,
$1.65 million
was received on June 27, 2016, and
$1.0 million
was received on September 1, 2016. The Company recognized
$1.0 million
of the
$3.65 million
license as revenues as of December 31, 2015, as such amount was determined to be fixed and determinable, in accordance with the Company’s revenue recognition policy as described in Note 1. The Company received and recognized
$1.65 million
and
$1 million
as revenues during the quarter ended June 30, 2016 and September 30, 2016, respectively. In exchange for the foregoing and other valuable consideration, Finjan agreed to, subject to certain restrictions, limits and other conditions, grant U.S. Licensee a non-exclusive, irrevocable (except in the case of non-payment by U.S Licensee or other material breach), worldwide license under Finjan Patents during the Term as specified in the December 30, 2015 License.
On April 7, 2015, Finjan entered into a Confidential Asset Purchase and Patent License Agreement (the “April 7, 2015 License”), effective as of April 7, 2015, with F-Secure Corporation, a company incorporated in Finland (“F-Secure”). The Company recognized
$700,000
of the
$1.0 million
license as revenues as of September 30, 2015, as such amount was determined to be fixed and determinable, in accordance with the Company’s revenue recognition policy as described in Note 1. The remaining balance of
$300,000
under the terms of the April 7, 2015 License was recognized as revenues as of March 31, 2016. The April 7, 2015 License also provides for the assignment by F-Secure to Finjan of two patents, U.S. Patent Nos. 8,474,048 and 7,769,991, including among other things, all progeny applications or patents, foreign counterparts and reissues (the “F-Secure Patents”). The Company has not yet determined if these patents fit into its business model, therefore any value of these patents would be limited to their cost which would be their filing fees, an immaterial amount. As such, the Company has concluded that their value is de minimis. In exchange for the foregoing and other valuable consideration, Finjan agreed to, subject to certain restrictions, limits and other conditions, grant F-Secure a worldwide, fully-paid, non-exclusive field of use license to Finjan patents owned as of the effective date or acquired by Finjan or its affiliates within
two years
from the effective date, as well as to the F-Secure Patents
On September 24, 2014, Finjan entered into a Confidential Patent License, Settlement and Release Agreement (the “September 24, 2014 License”) with a third party against whom Finjan had filed a patent infringement lawsuit. Pursuant to this September 24, 2014 License, the third party and Finjan also agreed to dismiss the infringement litigation, and each party gave the other a general release for all claims that it might have against the other, known or unknown, based on the actions of either party on or before the date of the settlement. Under the September 24, 2014 License, the third party will pay Finjan a license fee of
$8.0 million
payable in four installments. The first installment of
$3.0 million
was paid upon execution of the agreement and filing of the dismissal with prejudice, the second installment of
$2.0 million
was received on January 16, 2015, the third installment of
$2.0 million
was payable on or before January 15, 2016, and received on January 14, 2016. The fourth and final installment of
$1.0 million
is payable on or before January 13, 2017. The remaining balance of
$1.0 million
under the terms of the September 24, 2014 License agreement will be recognized as revenues when collectability is reasonably assured.
NOTE 5 - SERIES A PREFERRED STOCK
On May 6, 2016, Finjan entered into a Series A Preferred Stock Purchase Agreement with Halcyon LDRII, pursuant to which the Company agreed to issue to Halcyon LDRII in a private placement an aggregate of
102,000
shares of the Company’s Series A Preferred Stock Shares at a purchase price of
$100.00
per share, for aggregate proceeds of
$10.2 million
. The closing of the Private Placement occurred on May 20, 2016. The Company incurred issuance costs of
$0.7 million
which are recorded as an offset to the redeemable preferred stock.
The Series A Preferred Stock was accounted under Section 480-10-S99 - Distinguishing Liabilities from Equity (FASB Accounting Standards Codification 480) as amended by ASU 2009-04 - Accounting for Redeemable Equity Instruments (“ASU 2009-04”). Under ASU 2009-04, a redeemable equity security is to be classified as temporary equity if it is conditionally redeemable a) at a fixed or determinable price on a fixed or determinable date, b) at the option of the holder, or c) upon the occurrence of an event that is not solely within the control of the issuer. The Company’s financing is redeemable at the option of the holder. Therefore, the Company classified the Series A Preferred Stock as temporary equity in the condensed consolidated balance sheet.
The Series A Preferred Stock have redemption features that have a determinable price and determinable date based on the following liquidation preferences:
The lesser of:
|
|
•
|
2.8
x the original purchase price (OPP); or the following:
|
•
1.5
x the OPP if redeemed within 90 days of closing; or
•
1.65
x the OPP if redeemed between 90 and 360 days of closing; or
•
1.75
x the OPP if redeemed between 360 days and 720 days of closing; or
•
Thereafter,
1.75
x the OPP plus
0.1
x the OPP for every 90 day period the preferred remains outstanding.
The redemption feature is at the option of the holder and is defined in the Certificate of Designation as a percentage of certain revenues, which varies by type of revenue as well as date received. These revenues include monetary awards, damages, fees, recoveries, judgments in a suit, as well as monies received from gross licensing, royalty or similar revenue recovered from JVP related to Finjan’s investment in JVP. Such monetary awards are
not solely within the control of Finjan.
The increase in the redemption value is a deemed dividend that increases the carrying value of the Series A Preferred Stock to equal the redemption value at the end of each reporting period with an offsetting decrease to additional paid-in-capital.
On July 1, 2016, the Company
redeemed
$2.6 million
or
17,286
shares of the Series A Preferred stock;
$1.7 million
reduced the original recorded value of the Series A Preferred stock and
$0.9 million
reduced the accreted value.
On August 19, 2016, the Company's Series A Preferred liquidation preference increased from
1.50
to
1.65
; as a result, the Company accreted a dividend of
$1.3 million
. At September 30, 2016, the Series A Preferred stock was
$13.7 million
, net of the July redemption and the Liquidation value was
$14.0 million
.
Subsequent to quarter end, the Company redeemed
$0.2 million
or
1,212
shares of the Series A Preferred stock;
$0.1 million
reduced the original recorded value of the Series A Preferred stock and
$0.1 million
reduced the accreted value.
NOTE 6 – STOCKHOLDERS’ EQUITY
Stock-based Compensation
On July 10, 2014, the Company’s stockholders approved the Finjan Holdings, Inc. 2014 Incentive Compensation Plan (the "2014 Plan") at the annual meeting of stockholders, pursuant to which
2,196,836
shares of common stock were authorized for issuance. On June 24, 2015, the Company adopted the 2015 Israeli Sub-plan (the “2015 Israeli Sub-plan”) to the Company’s 2014 Plan, which enables the Company to grant options, and issue shares of common stock to employees and non-employees, who are employed by the Company or any of its affiliates, who are residents of the State of Israel.
The Company has issued a total of
836,872
Restricted Stock Units ("RSUs") of which
431,747
remain outstanding as of
September 30, 2016
. RSUs generally vest over
three
or
four
years, with one-third or one-fourth, respectively, vesting on the one-year anniversary followed by quarterly vesting thereafter.
Upon shareholder approval of the 2014 Plan, the 2013 Global Share Option Plan and Israeli Sub-Plan were terminated, other than respect to options outstanding under such plans.
1,718,832
options remain outstanding under the 2013 and 2014 plans as of
September 30, 2016
.
Stock-based compensation to employees and non-employees are recognized as expense in the condensed consolidated statement of operations. The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award (determined using Black-Scholes option pricing model for stock options and intrinsic value for RSUs), and is recognized as an expense over the requisite service period (generally the vesting of the equity awards). Determining the fair value of stock-based awards at the grant date requires significant estimates and judgments, including future employee stock option exercise behavior and requisite service periods.
During the three and nine months ended
September 30, 2016
, the Company expensed
$229,000
and
$682,000
, respectively, and
$187,000
and
$642,000
for three and nine months ended September 30, 2015, respectively, of stock-based compensation in the condensed consolidated statements of operations. All stock-based compensation expenses were selling, general and administration related. The aggregate intrinsic value of stock options outstanding and exercisable as of
September 30, 2016
was
$0
.
During the three and nine months ended September 30, 2016, the Company granted options to purchase
zero
and
295,000
shares of common stock, respectively. During the three and nine months ended September 30, 2016, the Company granted
zero
and
200,000
RSUs of common stock, respectively.
During the three and nine months ended September 30, 2016,
zero
and
20,000
RSUs were forfeited, respectively. During the three and nine months ended September 30, 2016,
zero
and
20,000
options were forfeited, respectively.
|
|
|
|
|
|
|
|
Number of
Options Outstanding
|
|
Number of RSU's
Outstanding
|
|
|
|
|
|
Outstanding 2013 & 2014 Plans – December 31, 2015
|
1,510,832
|
|
|
Non vested - December 31, 2015
|
408,710
|
|
Options granted
|
295,000
|
|
|
Shares granted
|
200,000
|
|
Options exercised
|
(67,000
|
)
|
|
Shares vested
|
(156,963
|
)
|
Options forfeited
|
(20,000
|
)
|
|
Shares forfeited
|
(20,000
|
)
|
Options expired
|
—
|
|
|
Shares expired
|
—
|
|
|
|
|
Non Vested & Outstanding - September 30, 2016
|
431,747
|
|
Outstanding – September 30, 2016
|
1,718,832
|
|
|
|
|
|
|
|
|
|
Exercisable – September 30, 2016
|
1,263,844
|
|
|
|
|
The Company estimates the fair values of stock options using the Black-Scholes option-pricing model. The assumptions used in the Black-Scholes option-pricing model and the weighted-average grant date fair value of the option awards for the periods presented were as follows:
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended
September 30,
|
|
2015
|
|
2016
|
|
2015
|
Volatility
|
110%
|
|
149% - 152%
|
|
94% - 112%
|
Expected term (in years)
|
6
|
|
7
|
|
6
|
Risk-free rate
|
1.66%
|
|
1.22% - 1.26%
|
|
1.54% - 1.64%
|
Expected dividend yield
|
0%
|
|
0%
|
|
0%
|
Weighted-average grant date fair value
|
$1.19
|
$
|
0.96 - 1.15
|
$
|
1.16 - 1.18
|
There were no grants issued in the current quarter.
The risk-free interest rate is based on the U.S. Treasury rates with maturities similar to the expected term of the option. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate and was based on historical volatility of comparative companies that are similar to the Company. For the nine months ended September 30, 2016, the Company updated its volatility assumptions to reflect the increased trading history in the Company’s stock.
The expected term was estimated using the simplified method. The simplified method calculates the expected term as the average of the time to vesting and the contractual life of the option. The dividend yield is
0%
as the Company has never declared or paid any cash dividends and does not anticipate paying dividends in the future.
NOTE 7 – RELATED PARTY TRANSACTIONS
In the course of business, the Company obtains legal services from a firm in which the Company’s Chairman is a partner. The Company incurred approximately
$38,000
and
$114,000
in legal fees to the firm during the three and nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016 and December 31, 2015, the Company has balances due to this firm of
$13,000
at both dates.
The Company obtained social media and investor related services from a firm in which the Company’s Chief Financial Officer holds a
50%
interest. The Company incurred approximately
$0
and
$22,000
in fees to the firm during the three and nine months ended September 30, 2016, respectively and
$24,000
and
$62,000
for the three and nine months ended September 30, 2015, respectively. As of September 30, 2016 and December 31, 2015, the Company had balances due to this firm of
$0
and
$4,000
, respectively. Effective June 30, 2016, the Company canceled this service agreement.
NOTE 8 - LITIGATION, CLAIMS AND ASSESSMENTS
A. United States District Court Actions
Finjan, Inc. v. FireEye, Inc., 4:13-cv-03133SBA, (N.D. Cal):
Finjan filed a patent infringement lawsuit against FireEye, Inc. in the United States District Court for the Northern District of California on July 8, 2013, asserting that FireEye, Inc. is directly and indirectly infringing certain claims of Finjan’s U.S. Patent Nos. 6,804,780, 7,058,822, 7,647,633, 7,975,305, 8,079,086, and 8,225,408, through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including but not limited to FireEye’s Threat Protection Platform, including the FireEye Malware Protection System, the FireEye Dynamic Threat Intelligence, and the FireEye Central Management System. Finjan amended its Complaint on August 16, 2013, to add U.S. Patent No. 6,154,844 to the list of asserted patents. The principal parties in this proceeding are Finjan, Inc. and FireEye, Inc. Finjan seeks entry of judgment that FireEye, Inc. has infringed, is infringing, and has induced infringement of the above-listed patents, a preliminary and permanent injunction from infringing, or inducing the infringement of the above-listed patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty and consistent with proof, enhanced damages, and enhanced damages for willful infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. FireEye, Inc. answered Finjan's Amended Complaint on September 3, 2013, by denying Finjan's allegations of infringement and counterclaiming that the asserted patents are invalid under 35 U.S.C. §§ 101, 102, 103 and/or 112. Both parties have demanded a jury trial. On June 2, 2014, the Honorable Saundra Brown Armstrong entered an Order Granting Motion to Stay Pending Reexamination of U.S. Patent Nos. 7,058,822 (“the ‘822 Patent”) and 7,647,633 (“the ‘633 Patent”). Accordingly, the action was placed off calendar until the U.S. Patent and Trademark Office ("USPTO") completed
its administrative reexamination proceedings. On February 16, 2016, the USPTO issued an Ex Parte Reexamination Certificate confirming the validity of claims 1-8 and 16-27 of the ‘822 Patent. On May 31, 2016, pursuant to the Court’s Order Granting Motion to Stay Pending Reexamination, the parties filed a joint status report regarding the status of reexamination proceedings of the ‘822 and ‘633 Patents. On September 16, 2016, the USPTO issued an Ex Parte Reexamination Certificate confirming the validity of claims 1-7 and 28-33 of the ‘633 Patent. On October 4, 2016, the Court directed the parties that if FireEye intends to file a Renewed Motion to Stay, it must do so by November 4, 2016. On November 3, 2016, FireEye filed its Renewed Motion for Stay. Finjan's response to the motion is due November 17, 2016, and FireEye's reply is due November 25, 2016. A hearing on this Motion is set for December 14, 2016. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. Blue Coat Systems, Inc., Case 5:13-cv-03999-BLF, (N.D. Cal.):
Finjan filed a patent infringement lawsuit against Blue Coat Systems, Inc., in the United States District Court for the Northern District of California on August 28, 2013, asserting that Blue Coat is directly and indirectly infringing certain claims of Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 6,965,968, 7,058,822, 7,418,731, and 7,647,333 patents. The principal parties in this proceeding are Finjan and Blue Coat. This action is before the Honorable Judge Beth Labson Freeman. The Court held a claim construction, or Markman Hearing, for this matter on August 22, 2014. The Court entered its Markman Order entitled “Order Construing Claims in U.S. Patent Nos. 6,154,844, 7,058,822, 7,418,731, and 7,647,633, on October 20, 2014, which is available on PACER (www.pacer.gov), as Docket No. 118. Trial for this action took place from July 20, 2015 through August 4, 2015. On August 4, 2015, the jury returned a unanimous verdict that each of the Finjan asserted patents are valid and enforceable. Further, the jury returned a unanimous verdict that Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 6,965,968, and 7,418,731 were literally infringed by Blue Coat, and that U.S. Patent No. 7,647,633 was infringed by Blue Coat under the Doctrine of Equivalents. Upon the findings of infringement, the jury also awarded Finjan approximately
$39.5 million
in damages as reasonable royalties for Blue Coat's infringement. On September 9, 2015, the Court held a bench trial on non-jury legal issues, and issued findings of fact and conclusions of law on November 20, 2015. On November 20, 2015, the Court entered Judgment in favor of Finjan. On January 29, 2016, the Court taxed costs against Blue Coat. A hearing for the parties’ post-trial motions was held on April 28, 2016. On July 18, 2016, the Court issued an order upholding the jury’s verdict of infringement, validity, and damages, and denying Blue Coat’s motion to amend the Court’s findings of fact and conclusions of law, denying Blue Coat’s motion for judgment as a matter of law, granting Blue Coat’s motion to amend the judgment to show infringement under the doctrine of equivalents is moot for the ‘844, ‘968, and ‘780 patents, denying Blue Coat’s motion for a new trial, denying Finjan’s motion for enhanced damages, granting Finjan’s motion for pre-and post-judgment interest, and denying Finjan’s motion for attorneys’ fees. Blue Coat filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit on August 17, 2016, and an Amended Notice of Appeal on August 22, 2016. Blue Coat’s appeal seeks a reversal of the jury’s findings of infringement, validity and damages, as well as a reversal of the Court’s finding of patent eligibility. On September 2, 2016, the parties submitted a joint stipulation for approval of a supersedeas bond and a stay of enforcement of the judgment pending the resolution of Blue Coat’s appeal. On September 7, 2016, the Court approved Blue Coat’s bond in the amount of
$40,086,172.78
. Finjan has not received any revenue from Blue Coat with respect to this lawsuit. There can be no assurance that Finjan will be successful in collecting the full amount of the jury award.
Finjan, Inc. v. Sophos Inc., Case 3:14-cv-01197-WHO (N.D. Cal.):
Finjan filed a patent infringement lawsuit against Sophos Inc. in the United States District Court for the Northern District of California on March 14, 2014, asserting that Sophos is directly and indirectly infringing certain claims of Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 7,613,918, 7,613,926, 7,757,289, and 8,141,154. Finjan amended the Complaint on April 8, 2014, to add U.S. Patent Nos. 8,677,494 and 8,566,580 to the list of asserted patents. Finjan asserts infringement against Sophos through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including but not limited to End User Protection Suites, Endpoint Antivirus, Endpoint Antivirus - Cloud, Sophos Cloud, Unified Threat Management, Next-Gen Firewall, Secure Web Gateway, Secure Email Gateway, Web Application Firewall, Network Storage Antivirus, Virtualization Security, SharePoint Security, Secure VPN, Secure Wi-Fi and Server Security. The principal parties in this proceeding are Finjan and Sophos. This action is before the Honorable William H. Orrick. Finjan seeks entry of judgment that Sophos has infringed and is infringing the above-listed patents, a judgment that Sophos has induced infringement of U.S. Patent Nos. 6,804,780, 7,613,918, 7,613,926, 7,757,289, 6,154,844, and 8,667,494, a judgment that Sophos has contributorily infringed U.S. Patent No. 8,566,580, a preliminary and permanent injunction from infringing, inducing, or contributorily infringing the same patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty and consistent with proof, enhanced damages, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Sophos filed its Answer to Finjan’s First Amended Complaint on May 9, 2014. Both parties demanded a jury trial. Sophos filed its Amended Answer to the Complaint on May 30, 2014. Mediation pursuant to the Court's ADR Program occurred on January 13, 2015 and it has not yet resulted in resolution between the parties. Further, a Technology Tutorial took place in this matter on February 9, 2015. A claim construction or Markman Hearing occurred on February 13, 2015. The Court entered its Markman Order entitled “Claim Construction Order” on March 2, 2015,
which is available on PACER (www.pacer.gov), as Docket No. 73. On April 9, 2015, Finjan filed a Second Amended Complaint that included a certificate of correction for the ‘154 Patent. On November 17, 2015, Finjan filed a Third Amended Complaint to add claims of Sophos’s willful infringement. Sophos filed an Answer to Finjan’s Third Amended Complaint on December 4, 2015. On May 24, 2016, the Court issued an order on the parties’ motions to strike, motions for summary judgment, and discovery matters. In its Order, the Court granted Sophos’ motion for summary judgment of non-infringement for the ‘289 and ‘918 Patents, denied the remainder of Sophos’ motion for summary judgment, denied Finjan’s motion for summary judgment of infringement for the ‘926 and ‘494 Patents, granted Finjan’s motion for summary judgment that certain prior art references were not publicly accessible, granted Finjan’s motion to strike in part to exclude certain prior art, granted Sophos’s motion to strike in part to exclude portions of Finjan’s expert reports on infringement, and deferred ruling on Finjan’s motion for summary judgment of validity for the ‘154, ‘494, ‘780, ‘844, and ‘926 patents after reviewing supplemental filings to be submitted with the parties’ pre-trial filings. The Court also precluded Sophos from relying on documents that were produced after the close of fact discovery. A mandatory settlement conference was held on July 25, 2016 with no settlement, and a pretrial conference was held on August 8, 2016. Trial for this action took place from September 6, 2016 through September 21, 2016. On September 21, 2016, the jury returned a unanimous verdict that each of the Finjan asserted patents are valid and enforceable. Further, the jury returned a unanimous verdict that Sophos literally infringed each of the asserted Finjan patents, specifically U.S. Patent Nos. 6,154,844; 8,677,494; 6,804,780; 7,613,926 and 8,141,154. The jury awarded Finjan
$15 million
in damages as a result of Sophos’ infringement. On October 31, 2016, the Court entered Judgment in favor of Finjan. Finjan has not received any revenue from Sophos with respect to this lawsuit. There can be no assurance that Finjan will be successful in collecting the full amount of the jury award.
Finjan, Inc. v. Symantec Corporation., Case 3:14-cv-02998-HSG (N.D. Cal.):
Finjan filed a patent infringement lawsuit against Symantec Corporation in the United States District Court for the Northern District of California on June 30, 2014, asserting that Symantec is directly and indirectly infringing certain claims of Finjan’s U.S. Patent Nos. 7,756,996, 7,757,289, 7,930,299, 8,015,182, and 8,141,154, through the manufacture, use, importation, sale, and/or offer for sale of certain products and services. Finjan amended the Complaint on September 11, 2014 to add U.S. Patent Nos. 6,154,844, 7,613,926 and 8,677,494 (collectively the "asserted patents"). The accused products and services include Symantec Endpoint Protection, Symantec Endpoint Protection Small Business Edition, Network Access Control, Norton Internet Security, Norton Anti-Virus, Norton 360, Safe-Web Lite, Norton Safe Web, Messaging Gateway, Messaging Gateway for Service Providers, Messaging Gateway Small Business Edition Managed Security Services-Advance Threat Protection, Advanced Threat Protection Solution, Symantec Protection Engine for Cloud Services, Symantec Protection Engine for Network Attached Storage, Symantec Mail Security for Domino, Symantec Mail Security for Microsoft Exchange, Symantec Scan Engine for Windows, Web Security.cloud, Email Security.cloud, AntiVirus/Filtering for Domino, AntiVirus for Linux, Mail Security for SMTP, Scan Engine for Linux/Solaris, AntiVirus for Caching/Messaging/NAS for Linux/Solaris, Protection Engine for Linux/Solaris, AntiVirus for Caching/Messaging/NAS for Windows, Web Gateway and Norton Security. The principal parties in this proceeding are Finjan and Symantec. Finjan seeks entry of judgment that Symantec has infringed and is infringing the asserted patents, has contributorily infringed and is contributorily infringing U.S. Patent No. 8,015,182, and has induced infringement, and/or is inducing infringement of U.S. Patent Nos. 6,154,844, 7,613,926, 7,756,996, 7,757,289, 7,930,299, and 8,677,494, a preliminary and permanent injunction from infringing, contributorily infringing, or inducing the infringement of the same patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty and consistent with proof, enhanced damages, and enhanced damages for willful infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Symantec answered the Amended Complaint on September 25, 2014, by denying Finjan’s allegations of infringement and counterclaiming that the asserted patents are invalid under 35 U.S.C. §§ 101, 102, 103 and/or 112. Symantec filed an Amended Answer on October 31, 2014, removing its Fourteenth Affirmative Defense of unenforceability. Both parties have demanded a jury trial. This matter is assigned to the Honorable Haywood S. Gilliam, Jr., United States District Judge. A claim construction or Markman Hearing was heard on June 29, 2015. On July 3, 2015, Symantec filed petitions for
Inter Partes
Review (“IPR”) before the Patent Trial and Appeal Board (“PTAB”) for all asserted claims of U.S. Patent Nos. 8,015,182, 8,141,154, 7,757,289, 7,930,299, and 7,756,996. On September 10, 2015, Symantec filed a total of
11
IPR petitions for all asserted claims of asserted patents. On August 20, 2015, Symantec filed a motion to stay the case pending completion of these
eight
IPR petitions. The motion was heard on October 1, 2015 and on October 9, 2015, the Court stayed the case pending the PTAB’s decision on whether to institute IPR of the claims that are the subject of Symantec’s petitions. On January 14, 2016, the PTAB denied institution of
six
IPRs of
five
asserted patents. On January 21, 2016, the parties filed a joint status report giving the Court an update regarding the status of the IPR petitions. On February 26, 2016 the PTAB denied institution of an additional
two
IPRs filed on separate patents, denying a total of
eight
petitions as of February 26, 2016. On March 11, 2016 the PTAB denied
two
more IPR's on patents against Symantec, denying a total of
10
petitions to date. On March 18, 2016, the PTAB granted institution on the 11th Petition by Symantec, relating to the ‘494 Patent (IPR2015-01892). On March 29, 2016, the parties jointly requested the Court lift the stay, and on March 30, 2016, the Court lifted the stay. On April 15, 2016, the parties jointly submitted a proposed schedule to the Court for the remainder of the case. On August 1, 2016 the Court issued a Scheduling Order indicating a timeline to trial but without specifically identifying a trial date. On August 31, 2016, the parties filed a joint stipulation requesting that the Court set a date for a settlement conference. To date, the Court has not scheduled a settlement conference. On August 25, 2016, Symantec filed an administrative motion requesting leave
to submit supplemental authority regarding various claim construction issues and requesting the Court take judicial notice of statements made during and in connection with the IPR proceedings. Finjan opposed the motion on August 28, 2016. On August 24, 2016, Finjan filed a request that the Court take judicial notice of the United States Patent Trial and Appeal Board’s (“PTAB”) construction of certain claim terms in connection with its denial to institute inter partes review with respect to the ‘926 and ‘494 Patents. On August 25, 2016, Finjan filed a request that the Court take judicial notice of the PTAB’s construction of certain claims in connection with its granting-in-part of inter partes review of the ‘494 Patent and denial of inter partes review of the ‘926 Patent. Following a hearing on November 3, 2016, the Court granted the Motion and ordered the parties to file a joint statement by no later than November 11, 2016, proposing an expedited schedule for disclosures, briefs, and a Markman hearing if "deemed necessary by the Court". There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. Palo Alto Networks, Inc., Case 3:14-cv-04908 PJH (N.D. Cal.):
Finjan filed a patent infringement lawsuit against Palo Alto Networks, Inc., in the United States District Court for the Northern District of California on November 4, 2014, asserting that Palo Alto Networks is directly and indirectly infringing certain claims of Finjan’s U.S. Patent Nos. 6,804,780, 6,965,968, 7,058,822, 7,418,731, 7,613,918, 7,613,926, 7,647,633, 8,141,154, 8,225,408, and 8,677,494, through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including but not limited to Next-Generation Security Platform, Next-Generation Firewall, Virtualized Firewall, WildFire Subscription, WildFire Platform, URL Filtering Subscription, Threat Prevention Subscription, and Advanced EndPoint Protection. Palo Alto Networks failed to timely respond to the Complaint and Finjan submitted an application for Entry of Default. On Palo Alto Networks’ request, Finjan stipulated to an extension of time for Palo Alto Networks to respond. The principal parties in this proceeding are Finjan and Palo Alto Networks. Finjan seeks entry of judgment that Palo Alto Networks has infringed and is infringing the above-listed patents, and has induced infringement and is inducing infringement of U.S. Patent Nos. 6,804,780, 6,965,968, 7,058,822, 7,418,731, 7613,918, 7,613,926, 7,647,633, 8,141,154, 8,225,408, and 8,677,494, a preliminary and permanent injunction from infringing, or inducing the infringement the same patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty consistent with proof, and enhanced damages for willful infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Palo Alto Networks filed its Answer and Counterclaims on December 31, 2015, by denying Finjan's allegations of infringement and counterclaiming that the asserted patents are invalid under 35 U.S.C. §§ 101, 102, 103 and/or 112. Both parties have demanded a jury trial. On October 8, 2015, the Honorable Edward M. Chen recused himself from the case and requested the case be reassigned to another judge. Also on October 8, 2015, the case was reassigned to the Honorable Phyllis J. Hamilton in the Oakland division of the District Court for the Northern District of California. On September 25, 2015, Palo Alto Networks filed a petition for IPR before the PTAB of U.S. Patent No. 8,141,154. On September 30, 2015, Palo Alto Networks filed petitions for IPR of U.S. Patent Nos. 7,058,822, 7,418,731, 7,647,633 and 8,225,408. On November 4, 2015, Palo Alto Networks filed a IPR petition of U.S. Patent Nos. 7,613,926. On November 5, 2015, Palo Alto Networks filed IPR petitions of U.S. Patent Nos. 6,965,968 and 8,141,154. On November 6, 2015, Palo Alto Networks filed IPR petitions of U.S. Patent Nos. 6,804,780, 7,613,918, 8,225,408 and 8,667,494. On December 10, 2015, the matter was stayed pending a decision by the PTAB on whether to institute IPR of Finjan's claims of its
ten
patents asserted against Palo Alto Networks. On March 21, 2016, the PTAB instituted trial on claims 1-8, 10 and 11 of the ‘154 Patent, and on April 20, 2016, the PTAB instituted trial on the same claims from a separate petition. On March 29, 2016, the PTAB instituted trial on the ‘408 Patent, claims 14 and 19 of the ‘633 Patent, and denied institution of trial on all other challenged claims of the ‘633 Patent, and all challenged claims of the ‘822 Patent and the ‘731 Patent. On May 9, 2016, the PTAB denied institution of trial on the ‘926 Patent, the ‘968 Patent, the ‘780 Patent, and the ‘918 Patent. On May 13, 2016, the PTAB instituted trial on the ‘494 Patent. On May 26, 2016, the Court ordered the stay to remain in effect until the PTAB’s final determination of the instituted IPRs. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. Blue Coat Systems, Inc., Case 5:15-cv-03295-BLF (N.D. Cal.):
Finjan filed a second patent infringement lawsuit against Blue Coat Systems, Inc. in the United States District Court for the Northern District of California on July 15, 2015, asserting that Blue Coat is directly infringing certain claims of Finjan’s U.S. Patent Nos. 6,154,844, 6,965,968, 7,418,731, 8,079,086, 8,225,408, 8,677,494, and 8,566,580, through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including but not limited to the Web Security Service, WebPulse Cloud Service, ProxySG Appliances and Software, Blue Coat Systems SV2800 and SV3800, Malware Analysis Appliances and Software, Security Analytics Platform, Content Analysis System, and Mail Threat Defense, S400-10 and S400-20. Finjan seeks entry of judgment that Blue Coat has infringed and is infringing the above-listed patents, a preliminary and permanent injunction from the infringement of the same patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty consistent with proof, and enhanced damages for willful infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Blue Coat filed its Answer to the Complaint with Jury Demand and Counterclaim with Jury Demand against Finjan on September 8, 2015. On September 29, 2015, Finjan filed its Answer to Blue Coat’s Counterclaim. This second Blue Coat action is also assigned to the Honorable Beth Labson Freeman. On December 15, 2015, Blue Coat filed a Motion to Stay the case pending final resolution of Case 5:13-cv-03999-BLF, and Motions for Joinder of several Petitions for IPR on
five
of
seven
asserted patents, and
Ex Parte
Reexamination requests for two asserted patents, filed previously by other defendants. A case management conference was held on December 17, 2015. A claim construction tutorial is scheduled for December 2, 2016, and a claim construction hearing is scheduled for December 9, 2016. A pretrial conference is scheduled for October 5, 2017, and trial is scheduled for October 30, 2017. On March 1, 2016 Finjan filed an amended Complaint to add existing Finjan patent 9,141,786 and two newly issued Finjan patents 9,189,621 (issued November 17, 2015) and 9,219,755 (issued December 22, 2015). On March 18, 2016, Blue Coat filed its Answer to the Amended Complaint and Counterclaims with Jury Demand. On April 8, 2016, Finjan filed its Answer to Blue Coat’s Counterclaims. On April 28, 2016, the Court held a hearing on Blue Coat’s motion to stay. On June 10, 2016, Finjan notified the Court on the status of the IPR and
ex parte
reexamination proceedings for the asserted patents. On June 27, 2016, Finjan filed an Amended Answer to Blue Coat’s counterclaims, adding an affirmative defense of collateral estoppel. On June 27, 2016, Blue Coat filed an Amended Answer to Finjan’s Amended Complaint. On July 11, 2016, Finjan filed a motion to strike certain affirmative defenses in Blue Coat’s Amended Answer, and a reply to Blue Coat’s counterclaims. On July 26, 2016 the Court denied Blue Coat's motion to stay the second case pending proceedings before the USPTO and the PTAB. On July 28, 2016 Finjan filed a motion for preliminary injunction against Blue Coat. The preliminary injunction would prohibit Blue Coat from making, using, offering to sell or selling within the U.S. or import into the U.S. the Dynamic Real-Time Rating component of Blue Coat’s WebPulse product. On August 12, 2016, the parties filed a joint claim construction statement setting forth the parties’ undisputed and disputed claim terms. On August 19, 2016, the Court issued an Order setting a schedule for discovery relating to Finjan’s preliminary injunction motion. On August 23, 2016, Blue Coat filed a motion to strike Finjan’s infringement contentions on the grounds of collateral estoppel and res judicata, which Finjan opposed on September 27, 2016. On September 16, 2016, Blue Coat filed a motion for judgment on the pleadings under 35 U.S.C. § 101, claiming that the asserted claims of the ‘494 patent are ineligible for lack of patentable subject matter. On October 7, 2016, the Court rescheduled the claim tutorial hearing to February 3, 2017, and the claims construction hearing to February 10, 2017. The hearing on Finjan's Motion to Strike Blue Coat's Sixth, Ninth and Tenth Affirmative Defenses, Finjan's Motion for Preliminary Injunction and Blue Coat's Motion for Judgment on the Pleadings is set for November 10, 2016. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v ESET, LLC et al., Case 3:16-cv-03731-JD (N.D. Cal.):
Finjan filed a patent infringement lawsuit against ESET, LLC ("ESET, LLC") and ESET SPOL S.R.O. (“ESET SPOL”) (collectively "ESET") in the United States District Court for the Northern District of California on July 1, 2016, asserting that ESET infringes Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 7,975,305, 8,079,086, 9,189,621, and 9,219,755, through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including but not limited to, ESET ThreatSense, ESET Advanced Heuristic, ESET DNA Signature, Host-based Intrusion Prevention System (HIPS), and ESET LiveGrid technologies including ESET’S Home Protection, Small Office, and Business product lines and ESET Services. Finjan seeks entry of a judgment that ESET has infringed and is infringing the asserted patents, a preliminary and permanent injunction from the infringement of the same patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty consistent with proof, and enhanced damages for willful infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. § 285. On July 14, 2016, this case was assigned to the Honorable James Donato in the San Francisco division. ESET has not yet filed an Answer to the Complaint. On July 27, 2016, ESET, LLC filed a motion to dismiss or stay this action on the grounds that ESET, LLC first filed a declaratory judgment action in the Southern District of California (ESET, LLC v. Finjan, Inc., Case No. 16-cv-01704 (S.D. Cal.)). A hearing was held on this motion on August 31, 2016, during which the Court stayed this matter pending the Southern District’s resolution of Finjan’s motion to dismiss ESET, LLC’s declaratory judgment action. On September 16, 2016, the Southern District dismissed ESET LLC’s declaratory judgment action without prejudice. On September 27, 2016, Finjan filed a notice of supplemental authority informing the Court that ESET’s declaratory judgment action in the Southern District of California was dismissed without prejudice and requesting that the Court lift the stay.
A Case Management Conference was held on October 6, 2016, wherein the Court granted Finjan's request to lift the stay, referred the matter to a settlement conference, and ordered service of the Complaint on ESET's counsel on behalf of ESET SPOL under Federal Rules of Civil Procedure 4(f).
ESET, LLC filed a motion to dismiss on October 20, 2016,
and ESET SPOL filed a motion to dismiss on November 2, 2016. Finjan filed its opposition to ESET, LLC's second motion to dismiss on November 3, 2016, and is expected to file its opposition to ESET SPOL's motion to dismiss in due course. A hearing on ESET's motions is scheduled for December 15, 2016. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. ESET SPOL S.R.O.. et al., Docket No. 4c O 33/16 (Düsseldorf District Court)
Finjan filed a patent infringement lawsuit against ESET SPOL. S.R.O. (ESET SPOL"), a Slovak Republic Corporation, and ESET Deutschland GmbH (collectively “ESET”) in the Düsseldorf District Court of Germany on July 1, 2016, asserting that ESET infringes Finjan’s European Patent No. 0 965 094 B1 (“the ‘094 Patent”), through the offering and/or delivering to customers in the Federal Republic of Germany software covered by the ‘094 Patent, including but not limited to ESET’s ThreatSense, ESET Advanced Heuristic, ESET DNA Signature, ESET LiveGrid technologies, including ESET’s Home Users, Small Office, and Business product lines and ESET services. Finjan seeks a judgment sentencing ESET to a fine for each violation of patent infringement or, alternatively imprisonment of ESET directors, cease and desist orders for offering or delivering infringing software, providing Finjan with profit information for offering or delivering infringing software, damages, which Finjan has suffered or shall suffer as a result of ESET offering or delivering infringing software since November 1, 2008. The Düsseldorf District Court is in the process of effective service to ESET SPOL. S.R.O. in Slovakia. ESET has yet to inform the court whether it will respond to Finjan’s complaint. There can be no assurance that Finjan will be successful in settling or litigating these claims.
ESET, LLC v. Finjan, Inc., Case No. 16-cv-01704 (S.D. Cal.)
ESET, LLC (“ESET”) filed a Complaint for Declaratory Judgment against Finjan, Inc. (“Finjan”) in the United States District Court for the Southern District of California on July 1, 2016, asserting that there is an actual controversy between the parties to declare that ESET does not infringe any claim of U.S. Patent No. 7,975,305 (“the ‘305 Patent”). ESET sought an entry of judgment that it has not infringed any claim of the ’305 Patent, an injunction against Finjan from asserting any of the claims in the ‘305 Patent against ESET or any of its customers or suppliers, and a finding that the case is exceptional and an award of fees and costs under 35 U.S.C. § 285. On July 11, 2016, ESET filed an Amended Complaint for Declaratory Judgment, asserting that there is an actual controversy between the parties to declare that ESET does not infringe any claim of the U.S. Patent Nos. 6,154,844 (“the ‘844 Patent”), 6,804,780 (“the ‘780 Patent”), 7,975,305 (“the ‘305 Patent”), 8,079,086 (“the ‘086 Patent”), 9,189,621 (“the ‘621 Patent”), and 9,219,755 (“the ‘755 Patent”). ESET seeks an entry of judgment that it has not infringed any claim of the ‘844, ‘780, ’305, ‘086, ‘621, and ‘755 Patents, an injunction against Finjan from asserting any of the claims of the ‘844, ‘780, ‘305, ‘086, ‘621, and ‘755 Patents against ESET or any of its customers or suppliers, and a finding that the case is exceptional and an award of fees and costs under 35 U.S.C. § 285. On July 26, 2016, Finjan filed a motion to dismiss the action pursuant to the first-to-file rule, asserting that Finjan was first to file an action in the Northern District of California with respect to five of the six patents at issue between the parties (Finjan, Inc. v ESET, LLC et al., Case 3:16-cv-03731-JD (N.D. Cal.). In the alternative, Finjan sought to have the case transferred to the Northern District of California on the basis that it is the most appropriate venue. On September 26, 2016, the Court granted Finjan’s motion and dismissed this action without prejudice. ESET has appealed
the dismissal to the Court of Appeals for the Federal Circuit. No date has been set by the Federal Circuit. (See above re Finjan, Inc. v ESET, LLC et al., Case 3:16-cv-03731-JD (N.D. Cal.).
Finjan, Inc. v. Blue Coat Systems, Inc., and Blue Coat Systems GmbH., Docket No. 4c O 33/16 (Dusseldorf District Court)
Finjan filed a third patent infringement lawsuit against Blue Coat Systems, Inc. which is its first patent infringement suit against Blue Coat’s subsidiary Blue Coat Systems GmbH, located in Munich Germany in the Dusseldorf District Court of Germany on October 14, 2016, asserting that Blue Coat infringes Finjan’s European Patent No. 0 965 094 B1 (“the ‘094 Patent”), through the offering and/or delivering to customers in the Federal Republic of Germany software covered by the ‘094 Patent, including but not limited to Blue Coat’s ProxySG Secure Web Gateway, Blue Coat’s Content Analysis System and Blue Coat’s Malware Analysis Appliance. Finjan seeks a judgment sentencing Blue Coat to a fine for each violation of patent infringement or, alternatively imprisonment of Blue Coat’s directors, cease and desist orders for offering or delivering infringing software, providing Finjan with profit information for offering or delivering infringing software, damages, which Finjan has suffered or shall suffer as a result of Blue Coat offering or delivering infringing software since November 1, 2008. The Dusseldorf District Court is in the process of effective service to Blue Coat Systems GmbH. Blue Coat has yet to inform the court whether it will respond to Finjan’s complaint. There can be no assurance that Finjan will be successful in settling or litigating these claims
.
B. Proceedings before the United States Patent & Trademark Office (USPTO)
Ex Parte
Reexamination Proceedings: As defined by the USPTO, an
Ex Parte
Reexamination is a “proceeding in which any person may request reexamination of a U.S. Patent based on one or more prior patents or printed publications. A requester who is not the patent owner has limited participation rights in the proceedings.”
U.S. Patent No. 8,079,086 (Assignee, Finjan, Inc.):
A first third-party request for
Ex Parte
Reexamination of U.S. Patent No. 8,079,086 was filed on October 7, 2013, on behalf of FireEye, Inc. and assigned Reexamination Control Number 90/013,015. The USPTO denied FireEye’s request on November 19, 2013, and the reexamination proceedings terminated on January 14, 2014.
A second third-party request by FireEye, Inc., for
Ex Parte
Reexamination of U.S. Patent No. 8,079,086 was filed on February 7, 2014, and assigned Reexamination Control Number 90/013,147. The USPTO denied FireEye’s second request on March 27, 2014, and the reexamination proceedings terminated on April 29, 2014.
A third third-party request for
Ex Parte
Reexamination of Claims 17 and 24 of U.S. Patent No. 8,079,086 was filed on December 9, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,654. The reexamination request was partially granted on February 2, 2016. Requester’s petitioned the Director to reconsider the partial denial and the petition was granted on March 21, 2016. A response to non-final Office Action was filed on August 10, 2016 and Finjan is awaiting USPTO action. There can be no assurance that Finjan will be successful in rebutting the patentability challenge before the USPTO.
U.S. Patent No. 7,975,305 (Assignee, Finjan, Inc.):
A third-party request for
Ex Parte
Reexamination of Claims 1, 2, 5 and 13 of U.S. Patent No. 7,975,305 was filed on December 11, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,660. The request for reexamination was granted on January 19, 2016 and a non-final Office Action was mailed on April 12, 2016. A response to non-final Office Action was filed on June 13, 2016. A Final Action was mailed on August 24, 2016 with a response due October 24, 2016. There can be no assurance that Finjan will be successful in rebutting the patentability challenge before the USPTO.
U.S. Patent No. 7,647,633 (Assignee, Finjan, Inc.):
A third-party request for
Ex Parte
Reexamination of Claims 1-7 and 28-33 of U.S. Patent No. 7,647,633 was filed on October 7, 2013, on behalf of FireEye, Inc. and assigned Reexamination Control Number 90/013,016. The request for reexamination was granted and a non-final Office Action was mailed November 19, 2013. The non-final Office Action included rejections of Claims 1-7 and 28-33 under various prior art (including previously considered and disclosed prior art) under 35 U.S.C. §§ 102 and/or 103. An in-person Examiner interview was conducted at the USPTO on February 4, 2014, and a timely response to non-final Office Action was filed on February 19, 2014. The response to non-final Office Action included arguments and a supporting declaration by Finjan showing commercial success, industry praise, and copying by others of products covered by pending claims; a declaration by a technology expert rebutting improper technical interpretations of the prior art and the invention; and additional new claims for consideration. Additionally, a renewed petition to accept an unintentionally delayed priority claim was also submitted and the petition was granted on January 23, 2015. An updated filing receipt reflecting the priority claim was issued. A final Office Action was issued May 22, 2015, and a Notice of Appeal was filed by Finjan on May 22, 2015. Finjan’s appeal brief was filed August 24, 2015, appealing the rejections of Claims 1-7, 28-33 and 42-52. An Examiner’s Answer was received on December 18, 2015. Finjan filed its Reply Brief requesting reversal of the rejections and a Request for Oral Hearing February 18, 2016. An Oral Hearing was conducted on June 22, 2016 and a decision reversing the Examiner’s rejections of claim 1-7, 28-33, 42, 44, 48 and 49 was mailed on June 29, 2016. An amendment cancelling rejected claims 43, 45-47 and 50-52 was filed on July 5, 2016 to move the application to Notice of Intent to Issue Reexamination Certificate (NIRC). A Reexamination Certificate confirming the patentability of original claims 1-7 and 28-33 and new claims 42, 44, 48 and 49 was issued on September 16, 2016.
A second third-party request for
Ex Parte
Reexamination of Claims 8 and 12 of U.S. Patent No. 7,647,633 was filed on December 9, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,652. The reexamination request was granted on February 3, 2016. On May 10, 2016, the USPTO terminated the reexamination and mailed a Notice of Intent to Issue a Reexamination Certificate and on May 26, 2016, a Reexamination Certificate was issued confirming the patentability of all claims.
U.S. Patent No. 7,058,822 (Assignee, Finjan, Inc.):
A third-party request for
Ex Parte
Reexamination of Claims 1-8 and 16-27 of U.S. Patent No. 7,058,822 was filed on October 7, 2013, on behalf of FireEye, Inc. and assigned Reexamination Control Number 90/013,017. The request for reexamination was granted and a non-final Office Action was mailed December 6, 2013. The non-final Office Action included rejections of Claims 1-8 and 16-27 under various prior art (including previously considered and disclosed prior art) under 35 U.S.C. §§ 102 and/or 103. An in-person Examiner interview was conducted at the USPTO on February 4, 2014, and a timely response to non-final Office Action was filed on March 6, 2014. A final Office Action was mailed on September 8, 2014 and a response thereto was filed on October 8, 2014, which included proposed claims amendments and arguments rebutting the various prior rejections. On October 23, 2014, an Advisory Action was issued by the Patent Office maintaining the rejections from the final Office Action and indicating that Finjan’s proposed claims amendments would not be entered. On December 8, 2014, Finjan: (1) filed a petition to the Director of the Central Reexamination Unit (CRU) under 37 CFR 1.181 challenging the Examiner’s failure to enter the amendments and requesting entry; and (2) a notice of appeal to the Patent Trial and Appeal Board. Finjan filed an appeal brief on February 8, 2015. The Examiner filed a brief on March 30, 2015. Finjan filed a Reply Brief and a Request for Oral Hearing on June 1, 2015, and the Appeal was docketed at the PTAB and assigned Appeal No. 2015-006304. An oral hearing before the PTAB took place on November 3, 2015. On December 30, 2015, the PTAB issue a decision reversing the Examiner’s rejection of Claims 1-8 and 16-27 and new claims 37 and 40 added during prosecution of the reexamination. On February 16, 2016, an
Ex Parte
Reexamination Certificate (Certificate No. US 7,058,822 C1) was issued to Finjan by the USPTO. Finjan was granted U.S. Patent Nos. 9,141,786 and 9,219,755 containing additional claims on September 22, 2015 and December 2, 2015, respectively. A Track 1 (accelerated examination) continuation application was filed on November 16, 2015, seeking yet additional claim coverage.
U.S. Patent No. 6,154,844 (Assignee, Finjan, Inc.):
A third-party request for ex parte reexamination of claims 32 and 42 of U.S. Patent No. 6,154,844 was filed on December 9, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,653. The request for reexamination was granted on January 13, 2016. On March 30, 2016, the Patent Office terminated the reexamination and mailed a Notice of Intent to Issue a Reexamination Certificate.
U.S. Patent No. 7,930,299 (Assignee, Finjan, Inc.):
A third-party request for ex parte reexamination of claims 13, 14-18, 20 of U.S. Patent No. 7,930,299 was filed on September 16, 2016 and assigned Reexamination Control Number 90/013,811. Finjan is awaiting USPTO action on the request.
U.S. Patent No. 8,015,182 (Assignee, Finjan, Inc.):
A third-party request for ex parte reexamination of claims 8-11, 13 of U.S. Patent No. 8,015,182 was filed on September 16, 2016 and assigned Reexamination Control Number 90/013,812. Finjan is awaiting USPTO action on the request.
U.S. Patent No. 7,756,996 (Assignee, Finjan, Inc.):
A third-party request for ex parte reexamination of claims 1-7 of U.S. Patent No. 7,756,996 was filed on September 16, 2016 and assigned Reexamination Control Number 90/013,813. Finjan is awaiting USPTO action on the request.
Inter Partes
Reexamination Proceedings:
As defined by the USPTO, an
Inter Partes
Reexamination is a “proceeding in which any person who is not the patent owner and is not otherwise estopped may request examination of a U.S. Patent issued from an original application filed on or after November 29, 1999, based on one or more prior patents or printed publications. Both patent owner and third party requester have participation rights throughout the proceeding, including appeal rights.” Effective September 16, 2012, the American Invents Act (AIA) replaced
Inter Partes
Reexaminations with proceedings referred to as post-grant review and
Inter
Partes
Review (IPR). Post-grant proceedings are generally available immediately after patent issuance. For patents filed under the pre-AIA first to invent rules (
i.e.
, applications filed prior to March 16, 2013, IPRs can be initiated immediately following issuance of patent. For patents examined under the AIA first-to-file rules (
i.e.
, applications filed on or after March 16, 2013), IPRs can be initiated after the nine-month window of eligibility for post-grant review.
U.S. Patent No. 6,480,962 (Assignee, Finjan, Inc.):
A third-party request for
Inter Partes
Reexamination of all Claims 1-55 of U.S. Patent No. 6,480,962 was filed on November 29, 2011, on behalf of Symantec Corporation, and assigned Reexamination Control Number 95/001,836. The request for reexamination was granted and a non-final Office Action was mailed January 25, 2012. The non-final Office Action included rejections of claims 1-55 under numerous prior art references and combinations of such references (including previously considered and disclosed prior art) under 35 U.S.C. §§ 102 and/or 103. Finjan filed a response to non-final Office Action and the USPTO mailed an Action Closing Prosecution (ACP) on October 2, 2013. Finjan responded to the ACP on December 2, 2013, which included proposed claim amendments for consideration. Symantec responded on January 2, 2014. On June 27, 2014, the USPTO stated that the proposed claim amendments would not be entered and issued a Right of Appeal Notice. On July 1, 2014, Finjan filed a Notice of Appeal of the rejection of Claims 1-55 followed by an Appeal Brief on September 2, 2014. The Requester Symantec filed a respondent brief on October 2, 2014. The Examiner filed a brief on March 25, 2015. Finjan filed a Rebuttal Brief on April 27, 2015 and a Request for Oral Hearing on May 26, 2015. The Rebuttal Brief maintained Finjan’s request to review the rejections of Claims 2-4, 7-11, 13-14, 16-20, 22-32, 34-36, 39-44, 46-51, 53 and 54. Claims 1, 5, 6, 12, 15, 21, 33, 37, 38, 45, 52 and 55 were withdrawn from appeal in view the final invalidity decision issued on September 15, 2014 by the Federal Circuit. The Appeal was forwarded to the PTAB in accordance with the Notice mailed June 2, 2015. Finjan also sought examination of additional claims through multiple Track I expedited continuation applications. Finjan was granted U.S. Patent Nos. 9,189,621 and 9,291,755 containing those additional claims on November 17, 2015 and December 22, 2015, respectively. Oral argument was heard on February 17, 1016. On February 29, 2016, the PTAB issued a decision affirming the rejections of the Examiner. On March 29, 2016, Finjan filed a request for rehearing regarding the rejection of claims 22-32 and 46 and the Requester filed comments on April 28, 2016. The PTAB denied Finjan’s Request for Rehearing on August 5, 2016. Finjan did not appeal the PTAB decision to the Federal Circuit.
Inter Partes
Review Proceedings:
As defined by the USPTO,
Inter Partes
Review (IPR) is a trial proceeding conducted at the Patent and Trial and Appeal Board (PTAB or Board) to review the patentability of one or more claims in a patent only on a ground that could be raised under §§ 102 or 103, and only on the basis of prior art consisting of patents or printed publications. For first-inventor-to-file patents IPR process begins with a third party (a person who is not the owner of the patent) filing a petition after the later of either: (1) nine months after the grant of the patent or issuance of a reissue patent; or (2) if a post grant review is instituted, the termination of the post grant review. These deadlines do not apply to first-to-invent patents. The patent owner may file a preliminary response to the petition. An IPR may be instituted upon a showing that there is a reasonable likelihood that the petitioner would prevail with respect to at least one claim challenged. If the proceeding is instituted and not dismissed, a final determination by the Board will be issued within one year (extendable for good cause by six months). The procedure for conducting IPR
took effect on September 16, 2012, and applies to any patent issued before, on, or after September 16, 2012.
U.S. Patent No. 7,613,926 (the “’926 Patent”)
On March 19, 2015, Sophos, Inc. filed a petition for IPR of U.S. Patent No. 7,613,926 (IPR2015-00907). Finjan filed a Patent Owner’s Preliminary Response (POPR) to the petition on June 26, 2015. The PTAB denied Sophos’ petition to institute the IPR proceeding on the ‘926 Patent on September 24, 2015. On October 26, 2015, Sophos filed a Request for Rehearing, and on December 4, 2015, the PTAB denied Sophos’ Request for Rehearing.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On April 8, 2015, Sophos, Inc. filed a petition for IPR of U.S. Patent No. 8,677,494 (IPR2015-01022). Finjan filed a POPR to the petition on July 15, 2015. The PTAB denied Sophos’ petition to institute the IPR proceeding on the ‘494 Patent on September 24, 2015. On October 26, 2015, Sophos filed a Request for Rehearing, and on January 28, 2016, the PTAB denied Sophos’ Request for Rehearing.
U.S. Patent No. 7,756,996 (the “’996 Patent”)
On July 3, 2015, Symantec Corporation filed two (2) separate petitions for IPR of U.S. Patent No. 7,756,996 (IPR2015-01545/01546). Finjan filed POPRs to the petitions October 19, 2015. The PTAB denied both of Symantec’s petitions to institute IPR proceedings on the ‘996 Patent on January 14, 2016. On February 16, 2016, Symantec filed a Request for Rehearing, and on February 25, 2016, the PTAB denied Symantec’s Request for Rehearing.
U.S. Patent No. 7,757,289 (the “’289 Patent”)
On July 3, 2015, Symantec Corporation filed a petition for IPR of U.S. Patent No. 7,757,289 (IPR2015-01552). Finjan filed a POPR to the petition on October 19, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings on the ‘289 Patent on January 14, 2016.
U.S. Patent No. 7,930,299 (the “’299 Patent”)
On July 3, 2015, Symantec Corporation filed a petition for IPR
of U.S. Patent No. 7,930,299 (IPR2015-01549). Finjan filed a POPR to the petition October 20, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings on the ‘299 Patent on January 14, 2016.
U.S. Patent No. 8,015,182 (the “’182 Patent”)
On July 3, 2015, Symantec Corporation filed a petition for IPR
of U.S
.
Patent No. 8,015,182 (IPR2015-01548). Finjan filed a POPR to the petition on October 20, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings on the ‘182 Patent on January 14, 2016.
U.S. Patent No. 8,141,154 (the “’154 Patent”)
On July 3, 2015, April 19, 2016, and May 26, 2016, Symantec Corporation filed three (3) separate petitions for
IPR
of U.S. Patent No. 8,141,154 (IPR2015-01547; IPR2016-00919; IPR2016-01071), and moved to join the petition for IPR filed by Palo Alto Networks with respect to the ‘154 Patent (IPR2016-00151). Finjan filed a POPR to the petition in IPR2015-01547 on October 19, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings in IPR2015-01547 on January 14, 2016. On February 16, 2016, Symantec filed a Request for Rehearing with respect to IPR2015-01547, and on February 25, 2016, the PTAB denied Symantec’s Request for Rehearing. With respect to IPR2016-00919 and IPR2016-01071 on the ‘154 Patent, the PTAB’s granted Symantec’s motion for joinder on September 8, 2016.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On September 10, 2015, Symantec Corporation filed two (2) separate petitions for IPR
of U.S. Patent No. 8,677,494 (IPR2015-01892/01897). Finjan filed POPRs to the petitions on December 28, 2015. With respect to IPR 2015-01897, the PTAB denied institution of IPR proceedings on the ‘494 Patent on February 26, 2016. On March 18, 2016, the PTAB granted institution of IPR proceedings on the ‘494 Patent (IPR2015-01892). On April 1, 2016, Finjan filed a partial request for rehearing. On May 23, 2016, the PTAB denied Finjan’s Request for Rehearing. On June 21, 2016, Finjan filed its Patent Owner Response to Symantec’s Petition in IPR 2015-01892.
U.S. Patent No. 6,154,844 (the “’844 Patent”)
On September 10, 2015, Symantec Corporation filed a petition for IPR
of U.S
.
Patent No. 6,154,844 (IPR2015-01894). Finjan filed a POPR to the petition on December 17, 2015. The PTAB denied institution of IPR proceedings on the ‘844 Patent on March 11, 2016.
U.S. Patent No. 7,613,926 (the “’926 Patent”)
On September 10, 2015, Symantec Corporation filed two (2) separate petitions for IPR of U.S. Patent No. 7,613,926 (IPR2015-01893/01895). Finjan filed POPRs to the petitions on December 17, 2015. With respect to IPR2015-01895, the PTAB denied institution of IPR proceedings on the ‘926 Patent on February 26, 1016. With respect to IPR2015-01893, the PTAB denied institution of IPR proceedings on the ‘926 Patent on March 11, 2016.
U.S. Patent No. 8,141,154 (the “’154 Patent”)
On September 25, 2015 and November 5, 2015, Palo Alto Networks Inc. filed two (2) separate petitions for IPR
of U.S. Patent No. 8,141,154 and a Motion for Joinder to Symantec’s Petition for IPR of the ‘154 Patent (IPR2015-01547). (IPR2015-01979; IPR2016-00151). Finjan filed a POPR to the first petition in IPR2015-01979 on December 29, 2015. With respect to IPR2015-01979, the PTAB granted institution of IPR proceedings on the ‘154 Patent on March 21, 2016. On April 5, 2016, Finjan filed a partial request for rehearing, and on April 19, 2016, the PTAB denied Finjan’s partial request for rehearing. On July 12,
2016, Finjan submitted a Patent Owner Response to the Petition. With respect to IPR2016-00151 on the ‘154 Patent, Finjan filed a POPR on February 17, 2016, and on April 20, 2016, the PTAB instituted trial on claims 1-8, 10, and 11, denied institution on the remaining claims and denied Palo Alto Network’s Motion for Joinder. On May 4, 2016, Finjan filed a partial request for rehearing, and on June 2, 2016, the PTAB denied Finjan’s Request for Rehearing. On June 16, 2016, the parties filed a joint notice to amend the Scheduling Order. On June 12, 2016, Finjan filed its Patent Owner Response to Palo Alto Network’s Petition in IPR 2015-01979. On August 31, 2016, Finjan filed its Patent Owner Response to Palo Alto Network’s Petition in IPR 2016-00151.
U.S. Patent No. 7,647,633 (the “’633 Patent”)
On September 30, 2015, Palo Alto Networks, Inc. filed a petition for IPR of U.S. Patent No. 7,647,633 (IPR2015-01974). Finjan filed a POPR to the petition on January 7, 2016. On March 29, 2016, the PTAB granted institution of IPR proceedings with respect to claims 14 and 19 of the ‘633 Patent, and denied institution with respect to all other challenged claims. On April 12, 2016, Palo Alto Networks filed a request for rehearing. On May 18, 2016, the PTAB denied Palo Alto Networks’ Request for Rehearing. On June 1, 2016, the parties filed a joint notice to amend the Scheduling Order. On August 9, 2016, Finjan filed its Patent Owner Response to Palo Alto Network’s Petition in IPR 2015-01974.
U.S. Patent No. 7,058,822 (the “’822 Patent”)
On September 30, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,058,822 (IPR2015-01999). Finjan filed a POPR to the petition on January 6, 2016. The PTAB denied institution of IPR proceedings on the ‘822 Patent on March 29, 2016. On April 28, 2016, Palo Alto Networks filed a Request for Rehearing, and on May 18, 2016, the PTAB granted Palo Alto Networks’ Request for Rehearing but did not alter its Decision denying institution.
U.S. Patent No. 7,418,731 (the “’731 Patent”)
On September 30, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,418,731 (IPR2015-02000). Finjan filed a POPR to the petition on January 8, 2016. The PTAB denied institution of IPR proceedings on the ‘731 Patent on March 23, 2016. On April 22, 2016, Palo Alto Networks filed a Request for Rehearing.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On September 30, 2015 and November 6, 2015, Palo Alto Networks Inc. filed two (2) separate petitions for IPRs of United States Patent No. 8,225,408 (IPR2015-02001; IPR2016-00157). Finjan filed POPRs to the petitions on January 6, 2016, and February 17, 2016 respectively. On March 29, 2016, the PTAB granted institution of IPR proceedings in IPR2015-02001 and IPR2016-00157. On April 12, 2016, Finjan filed requests for rehearing. On May 16, 2016, the PTAB denied Finjan’s Requests for Rehearing. On June 27, 2016, the parties filed a joint notice to amend the Scheduling Order. On August 9, 2016, Finjan filed its Patent Owner Response to Palo Alto Network’s Petition in IPR 2015-02001 and IPR 2016-00157.
U.S. Patent No. 7,613,926 (the “’926 Patent”)
On November 4, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,613,926 (IPR 2016-00145). Finjan filed a POPR to the petition on February 17, 2016. On May 9, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 6,965,968 (the “’968 Patent”)
On November 5, 2015, Palo Alto Networks Inc. filed two (2) separate petitions for IPRs of United States Patent No. 6,965,968 (IPR 2016-00149, IPR2016-00150). Finjan filed POPRs to the petitions on February 17, 2016. On May 16, 2016, the PTAB denied institution of IPR proceedings on both petitions.
U.S. Patent No. 6,804,780 (the “’780 Patent”)
On November 6, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 6,804,780 (IPR 2016-00165). Finjan filed a POPR to the petition on February 17, 2016. On April 21, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 7,613,918 (the “’918 Patent”)
On November 6, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,613,918 (IPR 2016-00164). Finjan filed a POPR to the petition on February 17, 2016. On May 5, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 8,677,494 (the “'494 Patent”)
On November 6, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 8,677,494 (IPR 2016-00159). Finjan filed a POPR to the petition on February 17, 2016. On May 13, 2016, the PTAB granted institution of IPR. On May 27, 2016, Finjan filed a Request for Rehearing, and on June 23, 2016 the PTAB denied Finjan’s Request for Rehearing. On June 27, 2016, the parties filed a joint notice to amend the Scheduling Order. On August 12, 2016, Finjan filed its Patent Owner Response to Palo Alto Network’s Petition in IPR 2016-00159.
U.S. Patent No. 6,965,968 (the “’968 Patent”)
On January 19, 2016, Blue Coat Systems, Inc. filed two Petitions for IPR of U.S. Patent No. 6,965,968 (“the ‘968 Patent”) (IPR2016-00478; IPR2016-00479) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘968 Patent (IPR2015-00149; IPR2015-00150). On April 22, 2016, Finjan filed a POPR to the petitions. On June 20, 2016, the PTAB denied institution of IPR proceedings on both petitions.
U.S. Patent No. 7,647,633 (the “’633 Patent”)
On January 20, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 7,647,633 (“the ‘633 Patent”) (IPR2016-00480) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘633 Patent (IPR2015-01974). On April 22, 2016, Finjan filed a POPR to the petition. On June 24, 2016, the PTAB instituted IPR, and granted Blue Coat’s Motion for Joinder.
U.S. Patent No. 7,418,731 (the “’731 Patent”)
On January 21, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 7,418,731 (“the ‘731 Patent”) (IPR2016-00493) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘731 Patent (IPR2015-0200). On April 29, 2016, Finjan filed a POPR to the petition. On June 8, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 6,804,780 (the “’780 Patent”)
On January 21, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 6,804,780 (“the ‘780 Patent”) (IPR2016-00492) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘780 Patent (IPR2016-00165). On April 29, 2016, Finjan filed a POPR to the petition. On June 8, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 6,154,844 (the “’844 Patent”)
On January 25, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 6,154,844 (“the ‘844 Patent”) (IPR2016-00498) and a Motion for Joinder to Symantec Corp.’s Petition for IPR of the ‘844 Patent (IPR2015-01894). On April 29, 2016, Finjan filed a POPR to the petition. On June 20, 2016, the PTAB dismissed the Petition and motion for joinder pursuant to Blue Coat’s motion to dismiss.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On May 2, 2016, Blue Coat Systems, Inc. filed two (2) separate petitions for IPRs of United States Patent No. 8,225,408 (IPR2016-00955; IPR2016-00956), and Motion for Joinder to Palo Alto Networks, Inc.’s Petitions for IPR of the ‘408 Patent (IPR2015-02001 and IPR2016-00157). On August 30, 2016, the PTAB granted Blue Coat Systems, Inc.’s Motions for Joinder.
U.S. Patent No. 8,677,494 (the “494 Patent”)
On April 14, 2016 and on June 10, 2016, Blue Coat Systems, Inc. filed two Petitions for IPR of United States Patent No. 8,677,494 (IPR2016-00890; IPR2016-01174) and a Motion for Joinder to Symantec Corp.’s Petition for IPR of the ‘494 Patent (IPR2015-01892) and Palo Alto Networks, Inc.’s Petition for IPR of the ‘494 Patent (IPR2016-00159).
U.S. Patent No. 8,141,154 (the “’154 Patent”)
On April 21, 2016, Proofpoint, Inc. and Armorize Technologies, Inc. filed a Petition for IPR of U.S. Patent No. 8,141,154 (IPR2016-00937) and a Motion for Joinder to Palo Alto Networks, Inc.’s Petition for IPR of the ‘154 Patent (IPR2015-01979). On June 24, 2016, the PTAB terminated the IPR proceedings pursuant to a joint motion.
U.S. Patent No. 7,647,633 (the “’633 Patent”)
On April 29, 2016, Proofpoint, Inc. and Armorize Technologies, Inc. filed a Petition for IPR of U.S. Patent No. 7,647,633 (“the ‘633 Patent”) (IPR2016-00966) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘633 Patent (IPR2015-01974). On June 24, 2016, the PTAB terminated the IPR proceedings pursuant to a joint motion.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On April 29, 2016, Proofpoint, Inc. and Armorize Technologies, Inc. filed two separate Petitions for IPR of U.S. Patent No. 8,225,408 (the “’408 Patent”) (IPR2016-00967; IPR2016-00970) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘408 Patent (IPR2015-02001; IPR2016-00157). On June 24, 2016, the PTAB terminated the IPR proceedings pursuant to a joint motion.
U.S. Patent No. 8,079,086 (the “’086 Patent”)
On July 15, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 8,079,086 (the “’086 Patent”) (IPR2016-01444).
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On July 15, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 8,225,408 (the “’408 Patent”) (IPR2016-01441).
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On July 15, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 8,677,494 (the “’494 Patent”) (IPR2016-01443).
U.S. Patent No. 8,225,408 (“’408 Patent”)
On October 28, 2016, FireEye, Inc. filed a Petition for IPR of the ‘408 Patent (IPR2017-00157) and a Motion for Joinder to Blue Coat Systems, Inc.’s Petition for IPR of the ‘408 Patent (IPR2016-01441).
Except for the foregoing disclosures, Finjan is not presently aware of any other material pending legal proceedings, to which Finjan or any of its subsidiaries are a party or of which any of its property is the subject.
Litigation, including patent litigation, is inherently subject to uncertainties. As such, there can be no assurance that Finjan will be successful in litigating and/or settling any of these claims.